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The state budget cannot support private investment

The state budget cannot support private investment

The inclusion of expenditures in the direction of "state support for large private investment projects" in the Public Investment Program does not meet the requirements of the legislation.

These notes are reflected in the document named the Opinion of the Chamber of Accounts of the Republic of Azerbaijan on the Draft Law of the Republic of Azerbaijan on the State Budget of the Republic of Azerbaijan for 2021 (See pp. 72-73).

Fakt Yoxla decided to examine the opinion of the Chamber of Accounts.

The volume of state capital investment (investment expenditures) in the state budget for 2021 is equal to 2 billion 835 million AZN.

According to the opinion of the Chamber of Accounts on the budget, the budget envelope envisages spending 535 million AZN on "state support for large private investment projects."

Table: The amount of projected expenditures for the State Investment Program (SIP) for 2021 

Directions Amount (million manats) The share (%)
Infrastructure projects 1,737.4 61.3
Expenditures of state support for large private investment projects 535.0 18.9
Socially oriented projects 390.1 13.8
Defense and law enforcement agencies 113.4 4
Other projects 59.1 2

Public Investment Program is a state program that determines the direction, duration, amount of investment expenditures, and customer organizations of commercial or non-commercial investment from the state budget and other sources not prohibited by law for the next budget year and the next three years.

In the Law on Budget System, the SIP, which includes important investment projects, is defined as one of the documents prepared and submitted together with the draft state budget.

Of the 2 billion 835 million AZN allocated for state investment in 2021, 2 billion 225 million AZN (79%) will be formed at the expense of public funds, and 610 million AZN (21%) at the expense of foreign loans.

The document Rules for the Preparation, Implementation, Monitoring, and Evaluation of the State Investment Program states that "investment expenditures" within the SIP means the expenditures intended to increase the assets of government agencies, extra-budgetary state funds, and state-owned enterprises. That is, the program does not provide for expenditures on projects implemented by the private sector.

According to these rules, the investment within the SIP is carried out in accordance with the investment project, which reflects the feasibility (socio-economic efficiency), the volume of work to be performed (volume of investment expenditures), and the justification of the project durations.

However, the SIP project only shows the expenditure directions, and investment projects in these areas are not reflected in the budget envelope. This is a violation of the requirements of the Rules for the Preparation, Implementation, Monitoring, and Evaluation of the State Investment Program regarding investment projects.

On the other hand, the non-disclosure of investment projects leaves unanswered the question of whether the funds spent on "state support for large private investment projects" are related to the increase of assets of government agencies, extra-budgetary state funds, and state-owned enterprises, as required by law.

State investments have the potential to have a significant impact on ensuring economic activity in many areas in Azerbaijan and the state of the country's economy in general. In this regard, the implementation of funds under the program without meeting the requirements of the Rules for the Preparation, Implementation, Monitoring, and Evaluation of the State Investment Program may reduce the effectiveness of the impact of investments on the country's economy.

On the other hand, there is no information on which companies are implementing large private investment projects, which are intended to be supported under the program.

These shortcomings in the development of the investment program also pose risks to corruption, transparency, and accountability.

Fakt Yoxla concludes that the claim of the Chamber of Accounts that the allocation of funds under the State Investment Program in the direction of ​​"state support expenditures for large private investment projects" does not meet the requirements of the law is True.

True
  • 27 January, 2021
  • 1450

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